Total CX

Fostering True Loyalty

Customers for Life

One of my colleagues said that using a rewards program to get "a customer for life" is just bull! Customers are human, subject to enticements from others, the seduction of promised rewards, and have a short attention span—it’s easy to get bored when you frequent the same stores, restaurants, hotel chains, etc. Variety is the spice of life in most situations. So even if you are happy with your provider, you often find a reason to try someone else.

Customer Retention versus Customer Acquisition 

One very annoying aspect of discounts and rewards is penalizing loyal customers in favor of new customers. In her article "Lollipop Loyalty," posted on DestinationCRM.com in January 2008, Jessica Tsai relayed a story told to her by Phil Sugar, CEO of the loyalty and rewards platform Smart Button, that truly epitomizes this phenomenon:

Why Rewards Programs Don’t Really Foster Loyalty

Although we all love discounts and rewards, a rewards program doesn’t necessarily foster
repeat business. Here are some reasons why:

SHOP ONLINE AND YOU’RE AUTOMATICALLY "REGISTERED." In the past, loyalty programs required explicit sign up in order to get these discounts and rewards. However, in today’s economy, and with the price transparency that customers now have via the Internet, consumers are offered discounts and freebies just for opening an email. When you make a purchase online, the etailer site has access to a lot of vital information—most conveniently, your email address. Discount offers and other rewards can easily be sent to anyone who ever purchased anything on the site. I get a real kick out of sites that I shopped at once, several years ago, that send me emails that start, "As a loyal customer…" Loyalty is not a single or even occasional purchases; loyalty is demonstrated by repeat business and a relationship with the brand.

LOW PRICES ARE COMMODITY ITEMS. When your rewards program is based on offering discounts on merchandise, you are basically entering into pricing wars. I know that I have received a discount offer for a particular item, and then I have Googled the Web to see if I can find a better price. If the site with the coupon offers the best price (and you have to include the shipping price), I buy it there. If I can find it cheaper, I go elsewhere. This isn’t loyalty; this is bargain shopping.

Preferred Customer Programs--Make Me Feel Special For being Your Customer

Unlike rewards programs, which I discussed in my last two posts, preferred customer programs are not about pricing, but rather are about receiving better treatment than the rest of the world. We all love being pampered, and are often willing to pay a premium for this special consideration. In the Preferred Customer Program scenario, common moments of truth, many of which are the same as for rewards programs, include the following:

IT’S TOO DIFFICULT TO UNDERSTAND HOW TO ACHIEVE PREFERRED STATUS AND TO SIGN UP. Just like rewards programs, it is important that customers understand exactly what is required for becoming a preferred customer—what, for example, constitutes the difference between achieving gold and platinum status. These differentiations should be simple (e.g., spend $500 and become a gold customer; spend $800 and become a platinum customer).

As for signing up, ideally, customers would be notified when they are eligible for preferred customer status, rather than having to "apply" and prove themselves worthy. Or it can happen automatically. I really enjoyed, for example, when American Airlines notified me that I had achieved Executive Platinum status and had already signed me up for all the benefits.